Most people only realise they are blacklisted when they apply for credit. A credit provider is very unlikely to provide further credit if you have unpaid bills, if you were unable to pay your last debts, what is the chance you will be able to pay now?
Riana Steyn says the word “blacklisted” can mean a variety of things from either having an account in arrears all the way to having a judgment so it is important to understand exactly what financial situation you are facing. The most important thing to understand is that even if you pay your debts, your negative listing will remain on your record for at least two years and in some cases as long as five years as this is the length of time a payment profile is held.
If you have fallen behind in payments then your credit record will show this but no legal action has been taken. At this stage you are able to approach your credit provider and make an arrangement to settle the debt.
If you have multiple accounts in arrears and you are struggling to meet them all then it may be worth contacting the National Debt Mediation Association (NDMA) which is a non-profit organization which can assist you in negotiating with your creditors. If you have an asset such as a car or house then you may be advised to consider debt counseling which can protect your assets.
Steyn says it is important to understand that even if you do pay off your debt, the fact that you fell into arrears remains on your record for five years, although it will stipulate that you settled the debt. In this case a credit provider may charge a higher rate for new credit or it may be more difficult to obtain credit so you will have to approach several institutions.
Make sure the credit provider has updated your details at the credit bureau to show that your debt is paid off.
When you are in default this usually means the debt has been handed over to lawyers. Your credit record will stipulate “handed over” or “written-off”. If the debt is fairly small and the creditor believes they have little chance in receiving payment they may write off the debt, however it remains visible on your credit record for two years.
Steyn says when the collectors start calling, you can still negotiate to pay the amount off. Immediately ask if you can come to an agreement and if they can negotiate a lower amount. Although the credit provider would most likely require the outstanding debt to be paid in full, they may concede to drop additional fees and interest charges and the debt collector or lawyer may agree to discount their fees in full and final settlement, although they do not have to agree to a discount.
Also find out if the original debt is still with the credit provider or whether the book has been sold to a debt collection agency. You then know who you are dealing with. If the debt is now owned by a debt collector the fees will account for a substantial amount of the debt so you can often negotiate a lower payment if you can settle with a lump sum as the debt collector wants to settle the debt as quickly as possible.
Even if you settle the debt, it will remain on your credit record for two years but it will show as “paid-off”. Once you have settled the debt and have a paid up letter, then you need to send this to the credit bureaus. They have 20 days to update the information. Ask for a copy of your credit record to ensure that it reflects your “paid up” status.
A judgment is very serious as it is a legal action and it is difficult to reverse. A judgment at a high court cannot be rescinded or removed unless it was issued in error. A high court judgment is usually for amount over R100 000.
For lesser amounts judgments are usually issued by the magistrate’s court and these can be rescinded if you pay off the debt. Again however the judgment will show on your record for five years as “paid-up”.
Steyn says even a paid up judgment will be seen as very negative by a credit provider and it will affect your ability to borrow money. The view is that a judgment is only taken after a very long process has been followed and a consumer who has ended up with legal action would suggest a very high risk to any future credit provider.
Steyn says in order to have a magistrate court rescind a judgment you have to not only have a paid up letter from the credit provider but you also need a letter stating that the credit provider agrees to the judgment being rescinded. A credit provider is not legally obliged to provide this and in some cases they are reluctant to do so. Steyn says some magistrates will rescind judgment without the letter, but this is no guarantee.
You will require an attorney to represent you in court, so before you go to this expense it is important to first find out if the credit provider would be willing to provide you with the letter. If you have a paid up letter as well as the letter to rescind the debt the attorney should not charge more than R1500 (checking) to go to court on your behalf.
If your judgment is rescinded it will remain on your record for five years stating that it has been “rescinded”.
If you have an outstanding judgment it will fall off your credit record after five years, however it remains active for 30 years. This means the credit provider can hold you to that debt for 30 years.Steyn says there may be many years of inactivity from the debt collectors and then they will suddenly demand money from you with interest – as the interest keeps running on the judgment amount. So if you have a judgment, don’t think it will just go away, it is best that you deal with it and make an attempt to settle the debt. Steyn says the information will not be “deleted” from credit providers own records, so you may never be able to get credit from that organization again.
This article was first published in City Press